McDonalds Case Study

Introduction

McDonalds is a large fast food chain with a global presence, operating in 118 countries. Many of its outlets are run on a franchise basis which is tightly controlled for consistency of experience. It is this consistency that has helped contribute to McDonalds' success.

McDonalds is differentiated from its competitors by the scale of its operations, and is so well-known that its name has been incorporated into broader vocabulary, with 'McDonaldization' referring to largely homogenised global operations and 'McJob' describing employment with little reward or prospects.

Originally set up by the McDonald brothers in 1940, rapid expansion came with the involvement of Ray Kroc in the 1950s. McDonalds' branding has one of the most widely recognised logos – the Golden Arches - in the world.

Reasons for Success

Ray Kroc was aggressive in his expansion strategy, building rapidly on early successes with a franchising model and raising capital by floating the business on the stock exchange in 1965.

The company has achieved a careful balance between global homogenisation for economies of scale and tailoring its products to local markets for maximum customer appeal.

It has been active in developing its offer, for example offering free wifi in its restaurants.

It has responded to criticisms that its food is unhealthy by providing a broader range of products for the health conscious customer.

Ethical concerns of consumers have been addressed by sourcing organic milk and fair trade coffee.

Promotions encourage repeat visits from a variety of market segments, for example through collectible toys for children and coffee loyalty cards for adults.

It is highly successful in providing consistent eating experiences and maintaining cleanliness.

Challenges

Despite its efforts, McDonalds is still associated in the UK with unhealthy food, a rise in obesity and jobs without prospects, requiring long term image-building by the organisation.

Its attempts to develop staff training through nationally recognised diplomas, validated by the QCA has been compromised by universities refusing to recognise them.

McDonalds has been the target of critical books and films which publicise negative aspects of the organisation.

The company's 'healthy' options have been criticised, for example the high fat content in salad dressings.

Litigations instigated by McDonalds have been seen as overly aggressive by the public because of the company's financial power in legal proceedings.

Outlook

McDonalds' short term outlook is positive as it has responded to consumer demand to broaden its range and it offers a low cost takeaway option for those hit by the recession.

The company has worked to address its image problem and appeal to a wider range of consumers, offering scope for increased turnover.

Expansion is planned through developing existing markets rather than moving into new territories, with opportunities in emerging economies due to, for example, increased car usage making drive-through restaurants more viable.

Overall, the organisation has good scope to expand its commercial operations and to engage previously ambivalent segments through broadening its offer.